ASA 320 Summary Materiality in planning and performing an audit

ISA 320 definitions

Performance materiality – definition

Means the amount or amounts set by the auditor at less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a If applicable, performance materiality also refers to the amount or amounts set by the auditor at less than the materiality level or levels for particular classes of transactions, account balances or disclosures.

ASA 320 Application

ASA 320 applies for;

• Audit of a financial report for a financial year,or a half-year, in accordance with the Corporations Act 2001; and
• Audit of a financial report, or a complete set of financial statements, for any other purpose.

ASA 320 Scope

ASA 320 deals with the auditor’s responsibility to apply the concept of materiality in planning and performing an audit of financial ASA 450 explains how materiality is applied in evaluating the effect of identified misstatements on the audit and of uncorrected misstatements, if any, on the financial statements.

ASA 320 Effective date 1 January 2010

ASA 320 Objective

The objective of the auditor is to apply the concept of materiality appropriately in planning and performing the audit.

ASA 320 Requirements

• ASA 320 require the auditor to determine at planning stage materiality at overall financial statement level, and where lower amount can impact the decision of user for specific transaction, balance and disclosure, such lower amount.
• ASA 320 require auditor to determine performance materiality for purposes of assessing the risks of material misstatement and determining the nature, timing and extent of further audit procedures.
• Revise the materiality or set the lower amount if required during any stage of audit.
• ASA 320 require to include in documentation;
  • Materiality for the financial statements as a whole;
  • If applicable, the materiality level or levels for particular classes of transactions, account balances or disclosures;
  • Performance materiality; and
  • Any revision during the audit.

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